Universities to take smaller spin-out stakes as Hunt backs review

The Westminster government is accepting the recommendations of a review under which UK universities will take a smaller stake in spin-outs in a bid to drive greater private investment.

As part of his Autumn Statement on 22 November, chancellor Jeremy Hunt was set to announce that he was accepting the 11 recommendations made by the review, led by University of Oxford vice-chancellor Irene Tracey and Andrew Williamson, a managing partner of the University of Cambridge’s in-house venture capital fund.

New guidelines will recommend that universities take an equity share expected to be between 10 per cent and 25 per cent, compared with 50 per cent or more in some spin-outs historically.

The idea is that academics and other founders will be able to keep a greater share of their inventions, which they can then sell to private equity firms and other investors to secure more funding and grow more quickly.

In the case of start-ups involving less intellectual property, typically focused on software, university stakes could be 10 per cent or lower, the Treasury said.

Other best practice guidelines in the review include streamlining spin-out deals and setting clear timelines, building on existing guidance produced by the TenU group of leading university technology transfer offices.

The review also advocates improving data via a national register of spin-outs, and universities publishing more information about their typical deal terms. And it suggests the creation of shared technology transfer offices across smaller research universities, and improvements to fellowship schemes that enable academics to spend time creating their own businesses.

Mr Hunt is hoping that more investor-friendly policies will help to create the next generation of university spin-outs, following in the footsteps of Oxford Nanopore, a biotech firm founded at Oxford in 2005 which was recently valued at £3.4 billion.

Spin-out companies raised £5.3 billion in investment in 2021-22 alone and the announcements being made as part of the Autumn Statement are designed to drive that figure even higher.

“Innovative, globally competitive businesses like Oxford Nanopore are making a huge contribution to our economy,” Mr Hunt said.

“It’s critical that we harness this potential and give universities the tools they need to translate cutting edge research into exciting UK businesses that start and grow in the UK.”

Mr Hunt was due to meet universities and investors at the UCL East campus on 21 November, where they are expected to endorse the review recommendations.

He was also expected to announce an extra £20 million in government funding for university spin-outs, and at least £50 million in additional support for a British Business Bank fund that supports research and development firms.

Michelle Donelan, the science secretary, said that “clear rules on the stakes held by universities” would help to create “more local jobs” and grow the economy.

In a joint statement, Professor Tracey and Dr Williamson said that their guidelines were “designed to foster a more collaborative and sharing environment among academia, entrepreneurship, and investment”.

“Our hope is that this will increase the number of spin-outs, reduce the time to negotiate licences, and increase the spin-outs success rate,” the authors said.

Anne Lane, chief executive of UCL Business, said that the recommendations would “help universities harmonise the creation of spin-outs”.

“We look forward to working even closer with fellow universities, government, and the investment community to ensure a healthy and sustained flow of investment back into academic research whilst supporting the emerging world-changing businesses of the next 30 years,” she said.

chris.havergal@timeshighereducation.com